Section 4940 of the Code imposes an excise tax on the “net investment income” of private foundations.  Historically, the excise tax was 2%, with an opportunity for reduction to 1% for a year in which the foundation’s qualifying distributions exceeded a certain amount calculated pursuant to a complicated formula.  Recent tax legislation simplifies the two-tiered system by replacing it with a flat rate of 1.39%.  The new rate is effective for tax years beginning after the date of enactment; which would be 2020 for calendar year private foundations.

This article was originally published by BCLP’s Charity Law Blog on January 21, 2020. The original article can be found here.

The 7520 rate for February 2020 increased to 2.2%.

The November 2019 Applicable Federal Interest Rates can be found here.

The Treasury Department issued final regulations on  November 26, 2019 (Treasury Decision 9884) confirming that taxpayers will not be subject to “clawback” of the value of their pre-2026 gifts of the temporarily increased gift and estate tax exemption.

Pursuant to the final regulations, taxpayers will be able to use (prior to 2026) the full increased gift and estate tax exclusion that became available beginning in 2018 under the citing the Tax Cuts and Jobs Act (TCJA) without concern that the IRS may attempt to include gifts that exceed the post-2025 exclusion amount in the taxpayer’s taxable estate at death.  This concern that lifetime gifts in excess of the exclusion amount at death might be included in the taxable estate of the decedent has come to be known as “clawback.”  The TCJA itself directed the IRS to publish regulations clarifying the clawback question and related

As we deal with the first snowfall of the season in New York, many New Yorkers may think about picking up and moving to Florida to avoid the cold winter.  Many New Yorkers also think about making Florida their tax home, to take advantage of the favorable estate and income tax laws there.  Florida has no personal income tax and no state estate tax, whereas New York currently has an income tax rate as high as 8.82% and estate taxes on estates over $5,850,000.00 at a rate as high as 16%.  President Trump has recently publicized his decision to make such a move.  But the switch to make Florida one’s legal domicile for tax purposes is not as easy as one might think.

For income tax purposes, if you start off as a New Yorker and file New York state resident income tax

Lawrence Brody authored an article in the December 2019/ January 2020 STEP Journal titled US Taxation of Death Benefits.  This article discusses the US income taxation of life insurance death benefits, particularly the exceptions to the general rule that proceeds paid by reason of the death of insured are not included as a part of the beneficiary’s taxable income. The complete article can be accessed by STEP members here.

The 7520 rate for January 2020 remained at 2%.

The January 2020 Applicable Federal Interest Rates can be found here.

The 7520 rate for December 2019 remained at 2%.

The December 2019 Applicable Federal Interest Rates can be found here.

Stephanie Moll was quoted in the November issue of the STEP Journal article, “All to Play For.” This article discusses potential changes in trust and estate law and taxation as the United States and Canada move into an election year. In particular, Moll discusses current issues faced by US taxpayers with foreign bank accounts as a result of certain reporting requirements. The complete article can be found here.

While the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”) has not yet been enacted, there are many who anticipate that it will be enacted by year end, primarily because it passed the House 413 to 3 and was on the fast track in the Senate to enactment until Senator Ted Cruz took it off the consent calendar (purportedly because it did not contain the prior version’s provision that would have authorized the use of 529 accounts for home schooling and not because he disagreed with the contents of the SECURE ACT remaining).  In addition, as pointed out in an October 15, 2019 letter from 7 Senators to Mitch McConnell, there are provisions in this Act that would “expand access to retirement plans for millions of Americans.”  Most of the provisions of the SECURE ACT do not have a direct impact on estate planning.  However

The 7520 rate for November 2019 increased to 2%.

The November 2019 Applicable Federal Interest Rates can be found here.